Home Buying Made Easy: A Step-by-Step Guide

Step One—Find Out What You Can Afford

Before you start shopping, it's important to know how much home you can afford. We recommend that you obtain a pre-approval of your loan. That way, you will have increased buying power with realtors and sellers and you can shop more confidently. In addition, you'll save a lot of time during the contract and closing phases.

Credit Reports and Your Credit Score

Before you contact a lender, you will need to assemble important information on your current finances. First and foremost, you should get copies of your credit reports and review them. If there are any discrepancies, it is best to clear them up before you contact your lender. Your credit information and ratings are maintained by the three major Credit Bureaus.

Under the Fair Credit Reporting Act, you are entitled to one free Personal Credit Report in a 12-month period. To request this free annual report online, by phone, or mail, visit www.annualcreditreport.com.

Learn more at Credit Reports & How to Request Them.

Documentation You'll Need

After reviewing your credit reports and making sure they are in order, you will need to gather the following personal documents for your loan officer:

• HUD-1 from sale of home (if you are selling a home and using the proceeds for a down payment)
• Current pay stub/Leave and Earnings Statement (LES)
• Retirement Statement/Award letter (Social Security, disability)
• Copy of transfer orders/relocation agreement
• W-2's for the past two years/tax returns
• Two months of bank/stock statements
• Proof of receipt of child care and/or alimony funds
• Gift letter (if gift is used for down payment, etc.)
• Year-to-date Profit and Loss Statement for self-employed borrowers
• VA documentation, including certificate of eligibility (COE), statement of service, DD214 and child care expense information

View additional sources of income that may be counted toward your loan qualification, as well as for down payment and closing costs.

View a list of monthly debts that will be used in your qualifying ratio.

Costs - Upfront Costs and Ongoing Costs

It is important to factor in the costs of getting your loan, as well as the costs you will have to operate and maintain your property.

Upfront costs include the earnest money deposit that you give with your sales agreement offer, your down payment, an appraisal fee for your mortgage once your sales contract is ratified and your closing costs.

Ongoing costs include property taxes, hazard insurance, condominium or homeowners association fees, maintenance and repairs, private mortgage insurance (if applicable) and flood insurance (if applicable).

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